Introduction
India
is looking at major labor law reforms with the replacement of
about 29 existing laws with 4 novel labor codes. These codes have
been introduced to consolidate the existing laws and to ensure
greater coverage of various employments.
This alert addresses the coverage, key provisions and the status
of these labor codes.
Background
The
current labor law regime in India is lengthy and tedious. While
certain employments are covered under multiple laws, there are
others which are not regulated. The duplication of compliances
under these existing laws creates challenges for employers.
In order to simplify the complex framework and to ensure
widespread coverage in an organized manner, the Ministry of Labour
and Employment, Government of India introduced four labor codes to
consolidate various central laws dealing with wages, social
security, resolution of industrial disputes and working
conditions.
Code
on Wages, 2019 (Wage Code)
-
> Objective:
The Wage Code has been enacted with a view to regularize wages
and bonus payments across all employments.
> Laws
subsumed: The Wage Code replaces four existing laws,
namely:
(i) Minimum Wages Act, 1948;
(ii) Payment of Wages Act, 1936;
(iii) Payment of Bonus Act, 1965; and
(iv) Equal Remuneration Act, 1976.
>
Coverage: The Wage Code is applicable to all
employments wherein any industry, trade, business, or
manufacture is carried out.
>
Key provisions:
(i) The central government will fix a “floor wage” by taking
into account the minimum living standards of workers.
(ii) The state government will fix the rate of minimum wage,
which shall not be less than the floor wage prescribed by
the central government.
(iii) The Wage Code mandates payment of wages within two
working days in case of retrenchment or resignation.
(iv) Provisions for payment of bonus are applicable to every
establishment where 20 or more persons are employed. Bonus
is required to be paid to every employee who draws less than
the prescribed wages and who has put in at least 30 days
work in an accounting year.
(v) Fraud, violent behaviour, theft and conviction for
sexual harassment are grounds for disqualification for
payment of bonus.
(vi) The Wage Code prohibits discrimination on the basis of
gender in relation to wages.
(vii) The Wage Code defines “wages” to mean all
remunerations which can be expressed in monetary terms with
certain exclusions. This definition replaces different
definitions under various labor laws.
>
Status:
(i)
The Wage Code has been published in the official gazette of
India. The date of commencement is yet to be notified by the
government.
(ii) The draft Code on Wages (Central) Rules, 2020 have also
been formulated.
Occupational
Safety, Health and Working Conditions Code, 2020 (Safety Code)
-
> Objective:
The Safety Code aims at the promotion of health and safety
conditions of workers in establishments, factories, mines and
docks.
> Laws
subsumed: The Safety Code subsumes 13 laws such as :
(i)
Factories Act, 1948;
(ii) Building and Other Construction Workers (Regulation of
Employment and Conditions of Service) Act, 1996;
(iii) Contract Labour (Regulation and Abolition) Act, 1970;
and
(iv) Inter-State Migrant workmen (Regulation of Employment
and Conditions) Act, 1979.
>
Coverage: The Safety Code is applicable to:
(i) Any trade, industry or business in which 10 or more
workers are employed;
(ii) Factories, motor transport undertaking, newspaper
establishment, building and other construction work,
plantation in which 10 or more workers are employed; and
(iii) Mines and dock work.
>
Key provisions:
(i)
The Safety Code mandates the registration of all
establishments and licensing of all contractors.
(ii) The Safety Code also mandates the issuance of an
appointment letter to every employee.
(iii) Women may be employed to (with their consent) to work
in an establishment before 6 a.m. and beyond 7 p.m.
(iv) Safety officers are required to be appointed for
certain establishments such as factories (with 500 or more
workers), building or other construction work (with 250 or
more workers), etc.
(v) The Safety Code prohibits employment of contract labor
in core activities, except if:
(a)
The normal functioning of the establishment is such that
the activity is ordinarily done through contractor; or
(b) The activities are such that they do not require full
time workers; or
(c) There is any sudden increase of volume of work in the
core activity which needs to be accomplished in a
specified time.
(vi) Employers are required to maintain registers; issue
wage slips and file returns in prescribed formats.
>
Status:
(i) The Safety Code has been recently passed by the Indian
Parliament.
(ii) The rules in relation with the Safety Code have not
been formulated yet.
Code
on Social Security, 2020 (SS Code)
-
> Objective:
The SS Code has been enacted with a goal to extend social
security to all employees and workers either in the organized
or unorganized sectors.
> Laws
subsumed: The SS Code replaces nine existing laws, such
as :
(i)
Employees' Compensation Act, 1923;
(ii) Employees' State Insurance Act, 1948;
(iii) Employees' Provident Funds and Miscellaneous
Provisions Act, 1952;
(iv) Maternity Benefit Act, 1961; and
(v) Payment of Gratuity Act, 1972.
>
Coverage: The SS Code has varied coverage. For example:
(i)
Provisions dealing with Employees’ Provident Fund are
applicable to every establishment in which 20 or more
employees are employed;
(ii) Provisions dealing with gratuity and maternity benefit
are applicable to every factory, shop or establishment in
which 10 or more employees are employed; and
(iii) Provisions dealing with Employees’ State Insurance are
applicable to every establishment in which 10 or more
persons are employed.
>
Key provisions:
(i) The government will formulate new Provident Fund Scheme,
Pension Scheme and an Insurance Scheme and respective funds
in this regard.
(ii) The contributions to the Provident Fund and the Pension
Fund will be made by the employers and the employees
collectively and the contributions to the Insurance Fund
will be made by the employer.
(iii) Employers and employees will also be required to make
contributions to the Employees’ State Insurance Corporation.
(iv) The SS Code mandates registration of unorganized
workers, gig workers and platform workers. The SS Code
further allows the government to formulate schemes for the
welfare of such workers that may be funded wholly or partly
by aggregators and/or the government.
(v) The SS Code also mandates registration of establishments
and building workers.
(vi) The onus of payment of maternity benefit, gratuity,
cess for building workers and employee compensation lies
solely on the employer.
(vii) Gratuity will be payable not only on superannuation or
retirement or resignation, but also on termination of
contract period under fixed term employment.
> Status:
(i)
The SS Code has been recently passed by the Indian
Parliament.
(ii) The rules in relation with the SS Code have not been
formulated yet.
Industrial
Relations Code, 2020 (IR Code)
-
> Objective:
The IR Code has been enacted with a view to regulate
conditions of employment in industrial establishments and
promote settlement of industrial disputes.
> Laws
subsumed: The IR Code replaces three existing laws,
namely:
(i)
Industrial Disputes Act, 1947;
(ii) Trade Unions Act, 1926; and
(iii) Industrial Employment (Standing Orders) Act, 1946.
>
Coverage: The IR Code is applicable to all industrial
establishments and undertakings.
>
Key provisions:
(i) The IR Code mandates the preparation of standing orders
for establishments that employ more than 300 employees.
(ii) Prior permission of the government is required to be
taken before closure, layoff or retrenchment by industrial
establishments (specifically factory, mine or plantation)
employing more than 300 workers.
(iii) A grievance redressal committee is required to be set
up by every industrial establishment employing 20 or more
workers, for resolution of disputes arising out of
individual grievances.
(iv) The IR Code also classifies any dispute in relation to
termination of the services of an individual worker to be an
industrial dispute. The worker may apply to the Industrial
Tribunal for adjudication of the dispute.
(v) The IR Code introduces the concept of negotiating
unions. The employer of an industrial establishment having
registered trade union(s) is required to recognize a
negotiating union.
> Status:
(i) The IR Code has been recently passed by the Indian
Parliament.
(ii) The rules in relation with the IR Code have not been
formulated yet.
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